Connecticut: in search of microgrids

Cities and towns explore paths to reliability

Reliability and sustainability—consider them related concepts, as sustainability is reliability over time—get bandied about these days with some frequency.

Like the weather, everybody's talking about it but nobody's doing anything about it. (Work with me here, we both know that's not entirely true.)

While utilities of course constantly explore new means to reliability and sustainability, today they have company. Specifically, cities and towns in Connecticut are actively exploring microgrids and distributed generation. Just as microgrids are sought in developing economies in lieu of a centralized power grid, so microgrids have become the focus of entities—cities, towns, campuses (military, hospital, university)—in the de-evolution of centralized power in developed countries.

These trends pose a challenge to today's electric utility. Should the intelligent utility accommodate the desire of its customers to create self-sustaining units that can reduce demand, but may offer benefits, including that reduced demand? (Can "islanding" of microgrids benefit a local utility? What about a microgrid's ability to deliver power back to the grid in an emergency?) Or should today's utility fight this trend if it cannot control the outcome?

In response to a past column we published on the topic, one reader articulated certain issues.

"Investor-owned utilities will continue to resist microgrids unless they can own them, because to do otherwise is tantamount to allowing unfettered competition, loss of market share and a process of voluntarily shrinking the regulated business," this correspondent wrote. "What are regulators likely to do? Candidates for microgrids may also want to own them because doing so is clearly cost-effective, but allowing unfettered private ownership affects not only the utility, but potentially customers that do not choose the microgrid option."

It's not difficult to imagine Connecticut's interest, following last fall's one-two punches by a tropical storm and a crushing early winter snow, which led to extended outages, egg on the face for local investor-owned utilities, well-publicized finger pointing, investigations by the state attorney general and the resignation of Jeff Butler, former CEO at Connecticut Light & Power.

As a new white paper spells it out, towns and cities in Connecticut are exploring "a desire to supplement the existing utility company grid to increase reliability and also to lower costs and environmental footprints. They envision that local microgrids will be collectively owned and run by energy users in Energy Improvement Districts (EIDs) enabled by state law in 2007 or, alternatively, as Connecticut Electrical Cooperatives enabled in 1971."

On the Massachusetts side of the border, affected by the same weather events last fall, communities are finding their quest for similar control through municipalization considerably more difficult, as enabling legislation continues to be killed off year after year. (See "Lexington, Mass.: Another Muni Candidate.") Of course, the poster child for municipalization is Boulder, Colo., now in a well-publicized struggle with local provider Xcel Energy. (See "Boulder Seeks Divorce From Xcel.")

Exploring the central issues in Connecticut's deliberations means addressing pressing questions in technology, regulation and finance. According to a white paper written by Pareto Energy, a microgrid vendor which facilitated the Connecticut discussion last month, those issues include the following challenges.

Technology:

Can distributed energy systems run safely during central power grid outages?

Can a city-center microgrid safely interconnect with a medium-voltage distribution grid?

What would an appropriate pilot project or projects to test these issues look like?

Regulation:

What legal governance model for a microgrid would be optimal? An energy improvement district? A municipal utility? A cooperative?

Can a microgrid legally distribute power within an existing utility's franchise area?

Finance:

How can early stage microgrid designs be funded in a way that attracts project-scale financing?

What types of projects have the best opportunity to be financed?

To be sure, there are more complex questions, some addressed in the Pareto white paper. I've tried to cite the most broadly pertinent ones. But the bigger questions, particularly for the investor-owned utility industry, revolve around how to deal with these grass-roots efforts. Get out ahead and lead on microgrids, in order to influence the outcome? Work with "break-away" communities to facilitate their chosen solution? Or fight for the status quo? Are there other options?

Readers, what are the upsides and downsides of such initiatives? And what are other issues in technology, regulation and finance not touched upon here?

Comments

Connecticut: in search of microgrids

- Apr 12, 2012 - 1:46 PM

With Microgrids, utilities are caught in an unenviable situation. While on the one hand they see a potential drop in revenue, on the other hand they still have an obligation to make up for any shortfall should a need arise. Hit by this double whammy, they see Microgrids more as a threat than as an opportunity. With customer owned and operated Microgrids, utilities just provide back-up power and network stability. Utilities want to be the prime providers of energy - not just back-up power.

A practical solution to this problem could be utiliy-owned and operated Microgrids. In this model, utilities own and operate all power generation facilities at customer sites (Microgrids, renewables and back-up diesel sets) and provide uninterrupted power to the customer. With CHPs and CCHPs utilities can also provide heating and cooling energy in addition to electricity. In this arrangement, utilities move from centrally operated power plants to decentralized ones at customer's premises. Customers focus on their core business and not on power generation.

This model, while helping the customers reap benefits of Microgrids, also provides utilities with a growing revenue stream. Are the utilities ready to go this route instead of standing in the way of Microgrids?.

Hindsight is 20 20: Go With Distributed

- Apr 3, 2012 - 6:37 AM

What should a utility do? Resist their impulse for protectionism and go with the flow, embrace the future of distributed energy, and give the public what it wants - a Plan B for grid delivered energy that is subject to disruption. In the near term, more and more building owners and occupants will embrace on-site power solutions when given the opportunity and when the price is right. In time, those technologies will become more feasible as an independent system (a microgrid).

Radical thoughts? Think again. There is no wall a utility can build that is high enough to keep distributed energy technology away from its customers. Utilities should follow the lead of IBM in the early 1980s, and embrace the future by shifting market focus with one eye still keenly on the ball. Faced with the advent of personal computing and on top of the world with its mainframes and minis, IBM gave its name to a PC design and the IBM PC clone was born. IBM stayed in its other businesses, but made a bet on a more distributed future. That company did it once again when it moved into services and away from commodity box business by selling its PC business to Lenovo. What IBM learned was that to survive, a leader needs to adapt, even if that means giving up on a comfortable position in the market.

In some ways, utilities find themselves in a position not unlike the position the railroads were in when automobile companies began to sprout up. On top of the world, they dismissed the horseless carriages as mere toys in comparison to their network of sleek Pullman coaches running on rails that allowed a traveler to go in style from major city to major city, from town to town. But automobiles got better in time, and those railroad coaches were always going to be limited to going where the rails were, just as a utility will always be limited to delivering power over the grid, which is subject to outages. Likewise, landline telephones have given way to cellular mobility, and now, the wonder of smart phones has captured our imagination. Try running an app on a wall kitchen telephone.

Great industries can be disrupted by new technologies, and if utilities can perceive such changes as inevitable, they should run out in front of the parade, or risk getting moved aside by forms of energy technology that are not subject to disruption by storms, squirrels, or terrorists.

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